Hyper-rich Conservatives loathe John Maynard Keynes, and with good cause. His prescriptions for the economy run counter to their Galtian dreams of world domination with themselves in the Howard Roark/John Galt roles. If any of them ever read Chapter 24 of Keynes’ book, The General theory of Employment, Interest and Money, they would realize that Keynes despised them right back. He thought they were a bunch of useless sacks of money with little purpose and less value, a group whose success arises from chance and the false economic theories they support.

Keynes explains that the major mistake people make about economics is the idea that capital is scarce, and must be rewarded heavily to encourage investment in job-creating projects. Keynesian theory says that this view is utterly wrong. Keynes says that the amount of capital needed to operate an economy at full employment is limited, and once achieved, the marginal return to capital will drop to the point that it merely covers depreciation, obsolescence, and a small return for risk and for managerial skill and judgment.

Now, though this state of affairs would be quite compatible with some measure of individualism, yet it would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital.

Savor that thought for a minute.

Chapter 24 begins with the statement that the twin problems of capitalism are “… its failure to provide for full employment, and its arbitrary and inequitable distribution of wealth and incomes.” The hyper-rich conservatives who dominate our political/economic lives regard those as features, not bugs, and have spent their money to make sure that workers and voters don’t understand that these are real and fixable problems. Practically all economists have lost any sense that Keynes is right, and instead teach us that we have to have a pool of unemployed to make sure that wage demands don’t push up inflation. See, e.g. Mulligan, Casey.

Keynes wrote in 1935. He says that in his time the average citizen was certain that the estate tax, which he calls “death duties”, was a bad thing because it removed scarce capital from the economy. Nonsense, says Keynes. When the government spends money, including the money generated by the estate tax, it increases the propensity of the average person to consume, which creates the incentive to save and invest in a virtuous cycle.

Thus our argument leads towards the conclusion that in contemporary conditions the growth of wealth, so far from being dependant on the abstinence of the rich, as is commonly supposed, is more likely to be impeded by it.

Our contemporary conditions are a good test of his theory. There is a massive concentration of wealth in the hands of a very few. There are trillions of dollars floating around uselessly in overseas bank accounts of the rich, their corporations, corrupt politicians from around the world, drug cartels and other scum. The hyper-rich do not spend much of their money on consumption. Instead they use it to generate political power. Then they use that power to increase the returns on their capital by insisting on monopoly control, lower taxes, less regulation and the ability to crush the demands of labor with an enormous pool of increasingly desperate unemployed. This works to the benefit of the corrupt politicians and drug sellers, the free riders on the sleazy rich.

Keynes is right that the estate tax is a test of the ability of average voters to understand the economy. As he says, while there is some justification for inequality in wealth from work and production, that doesn’t apply to inequality in inheritance. See, e.g., the creepy Walton heirs. Every effort bent to support this ignorance is vigorously supported by the hyper-rich and their willing tools in economics and politics.

Chapter 24 is sketchy. It doesn’t offer a pathway to change or make specific predictions of how much capital a society needs. It doesn’t explain exactly how this would happen, or what would have to change in the minds of voters to make it possible. The permanent campaign to discredit Keynes has all but erased the memory of his memorable phrase, The Euthanasia of the Rentier.

One group that might recall this felicitous phrase is the Modern Money Theorists. L. Randall Wray’s excellent work Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems sets out in Chapter 7 a sensible program to create full employment, and provides a detailed refutation of the stupid idea that full employment leads to inflation. Wray doesn’t talk about inequitable wealth distribution, but I’m pretty sure his plan would also lead to the Euthanasia of the Rentier.

The Progressive Caucus in Congress does not understand these ideas either. As Gaius Publius points out at AmericaBlog, they are all neoliberal Rubinites. All of their proposals are premised on failed economic theories, and spend way too much time bowing in the direction of the great American Capitalist. I think Euthanasia of the Rentier would make a marvelous slogan for a progressive economic caucus.

Chapter 24 begins with the statement that the twin problems of capitalism are “… its failure to provide for full employment,

in addition, capitalism is at odds with full employment, the capitalists goal is to hire the least amount of labor as possible, paying the least amount possible, to support their increasing margin of profit

added to that, the more laborers out of work the cheaper labor costs

I think a new battle call could be “captitalism is at odds with full employment”

The problem is that most schools are teaching the same neoliberal economics that the rich believe in. I know that’s the crap that I was taught in BOTH a state community college AND at James Madison University.

Keynesian economics is just not taught anymore (and MMT even less).

ECAHN would know better than I, but I suspect that one could take almost every economics course available today and come out believing Keynes a hack and Robert Rubin a genius. (Althougth I should add there may be certain areas where Keynes was “less than right”)

And Wray et. al. have laid out the path to full employment and the way to use money for the public purpose. Unfortunately, none of those we call progressives in congress understand any of it. If I missed someone, please tell me.

Given how poorly economics is taught even in college these days, it may be just as well that politicians don’t take economics classes. After all, Geithner studied at Dartmouth, Greenspan at NYU, Rubin at Harvard (and Summers was president there.)

Until most recently, and then only in a few schools, economics education was mostly a fraud. Actually I think back in the sixties and early seventies some schools taught macroeconomics with at least a nod to Keynes.

How would you like to live in a privatized city in Honduras? That could be the next step for the rich. Own the whole city including the law. So far from euthanizing the rentiers, they are planning to own you.

I think a lot of people are quite capable or realizing that the current versions of economics aren’t working. The question is whether they are capable of finding and learning new ideas.

People who get elected to Congress are rarely thoughtful. As a group, they seem to be gregarious and pleasant, but not intellectually curious. They are not going to buck the consensus views of anything. Even if they wanted to, most of them lack the time and energy for close study. They have to spend hours raising money. We won’t get any help from them.

It would really be great if there were a few of them who were intellectually curious and who had the time to think about the problems we face instead of sitting with lobbyists to learn what the rich want to do.

In My city, a new seawall was built along the banks of an old canal. The seawall spans the area along the public road, but where private property abuts the canal, the crumbling old concrete wall remains – an eyesore.

The private property owners opted out. They didn’t have the money ($1000 per foot). Who could blame them? They would have had to come up with $60K to $100K.

Great column Masaccio. The more it is said the better but the rich have for centuries been scamming with all kinds of fantasy and fiction those who create their wealth for them. Chris Hayes had Krugman on this morning and some other good folks. One of the topics the immense hoard of corporate capital and why its not being put into the economy. As you point out they are so awash in money and still are crying for “incentives.” It’s a scam.

In this connection, one notes with horror that the Fed has set 6.5% unemployment (really at least 12% if we use real figures) as the rate it’s shooting for before it starts to rein in the economy.

By the way, does it strike anyone as odd that the Fed and its major counterparts around the world are considered to be “independent” central banks? Why? Independent of whom or what? The Fed is owned by the private banks. Every particle of it down to the molecular level is corrupt and compromised.

I had some economics courses in the late 1970′s. At that time, Keynes was respected by the economists that taught me. Well, we can see what the results are of ignoring him when we faced the severe recession and liquidity trap of the last few years. Instead of rebounding, Europe made things worse and the US has had a limp recovery and is probably headed for a double-dip recession. Imagine if biologists dismissed Darwin, physicists smeared Einstein and geologists rejected plate tectonics. It’s similar to that.

Well we can see what happened when we got closest to the euthanasia of the rentier, in the 1970s. Increased labor power, very low unemployment, and better wages made workers more daring — not more docile. Capital went into crisis mode, and as a result that’s why we’ve seen the huge and ever-growing disparity between productivity and wages.

We can’t get full employment without gaining full power as workers. And for that, at some point along the way we’re going to have to say goodbye to capitalism.

P.S. Taxes on money that people attempt to leave to their heirs or legatees is neither a death tax nor a death duty. A gift tax is not really a tax on gifts, either.

In both cases, they are simply income taxes. In one case, it is income to heirs or legatees and in the other case, it is income to the person or entity receiving the gift. We simply collect it from the giver (the estate or the living giver) instead of the donor.

In other cases, like wages or book royalties, for example, we collect income tax from person who receives the income. However, in all cases, it is income tax. Money is taxed whenever it changes hands, period. Get over it.

For various reasons, intelligent from a societal standpoint or not, we allow more exemptions when an estate or a living donor is providing the funds to a person for doing nothing than we do when a person becomes entitled to money by putting in an honest day’s work. Still, it’s all income tax.

If we called it a tax on working, then we could also claim that we are taxing people for dying. Meanwhile, we’re doing a fake thing by calling one an income tax and the other a death tax.

Sometimes I think, in my more cynical moments, that the only reason Rick Wolff gets any press from the mainstream media is because he criticizes Keynes. (Of course, he’s criticizing Keynes from the left, for not going far enough and actually calling for a change in how the distribution of the surplus is organized, but that’s not something the mainstream press is likely to notice, much less explain.)